ISLAMABAD, Pakistan — Pakistan’s auto industry is moving toward a policy reset as official trade data show motor car CKD/SKD imports climbing to roughly $1.3 billion in the first eight months of FY26, underscoring how heavily local assembly still depends on imported kits, April 8, 2026. The pressure is intensifying because the current policy cycle ends in June 2026 and the next framework is being shaped alongside broader tariff reforms.
Official group-wise import data for July-January FY26 show motor car CKD/SKD imports at $1.14 billion, up from $481.9 million a year earlier, while the Pakistan Bureau of Statistics’ February 2026 trade release lists another Rs44.0 billion in motor car CKD/SKD imports for February alone, a 68.9% year-over-year increase. Those figures explain why the sector is again being judged less by assembly volumes and more by how little of the high-value vehicle content is actually produced at home.
Why Pakistan auto policy is back under scrutiny
The issue is not the absence of an auto industry, but the degree to which policy has rewarded assembly more quickly than deep manufacturing. The Auto Industry Development and Export Policy (AIDEP) 2021-26 promised localization, import substitution and exports, and it laid out mandatory export targets that rose to 10% of import value by 2025-26. Yet exports never became the balancing force policymakers had envisioned, leaving imported kits to carry much of the growth story.
That shortfall now matters more because the government’s draft National Tariff Policy 2025-30 proposes phasing out additional customs duties, eliminating regulatory duties and compressing customs duty slabs to 0%, 5%, 10% and 15%. For the auto sector, that means the next policy will be written under tighter protection and stronger pressure to prove that incentives translated into real capability.
What the data say about the localization gap
The Competition Commission of Pakistan’s recent industry study says long-running, high-volume models may reach 50% to 70% localization by parts count, but average localization by value is closer to 40% to 60% because engines, transmissions, hybrid systems and advanced electronics are still imported. The same study warns that poorly sequenced reform could widen the current account deficit by increasing CKD and CBU imports while shrinking the local manufacturing base.
That leaves policymakers with an increasingly narrow balancing act. Liberalize too quickly and parts vendors face a demand shock. Protect too long and the industry risks staying trapped in small-scale assembly, weak exports and repeated foreign-exchange stress.
This warning is not new
The pattern has been visible for years. In February 2021, Dawn reported that CKD/SKD arrivals had already jumped 79% to $468 million in the first seven months of FY21 as new entrants leaned heavily on concessionary imports. By August 2022, the paper was reporting that the national CKD/SKD bill had hit a record $1.7 billion in FY22 despite repeated claims that higher localization would eventually lower prices. By November 2025, the debate had shifted to how the coming Auto Industry Policy 2026-31 would fit into a broader tariff-liberalization agenda.
That continuity is what gives the current moment its weight. Pakistan is not confronting a one-off spike in kit imports; it is confronting the cumulative result of policy cycles that attracted investment and widened model choice, but did not push enough of the sector into higher-value manufacturing, testing, certification and export readiness.
What comes next
The next framework will likely be judged on three tests: whether incentives are tied to measurable value addition rather than simple assembly, whether export benchmarks are enforceable rather than aspirational, and whether vendors get the standards, testing and financing support needed to move into higher-value components. Without that shift, Pakistan may continue posting stronger assembly numbers while importing the most expensive parts of the vehicles it says it makes.
The real reckoning, then, is not whether Pakistan needs another auto policy. It is whether the next one finally turns assembly growth into manufacturing depth.
